International Express Travel And Tour Services Inc.

vs Court of Appeals
343 SCRA 674 [GR No. 119002 October 19, 2000]
Facts: On June 30, 1989, petitioner International Express Travel and Tours Services Inc., through its managing director,
wrote a letter to the Philippine Football Federation through its President Henri Kahn, wherein the former offered its
services as a travel agency to the latter. The offer was accepted. Petitioner secured the airline tickets for the trips of the
athletes and officials of the Federation to the South East Asian Games in Kuala Lumpur as well as various other trips to
the Peoples Republic of China and Brisbane. The total cost of the tickets amounted to Php449,654.83. For the tickets
received, the Federation made two partial payments, both in September of 1989 in the total amount of Php176,467.50. On
October 4, 1989, petitioner wrote the Federation, through the private respondent a demand letter requesting for the
amount of Php265,844.33. On October 30, 1989, the Federation, through the project gintong alay, paid the amount of
Php31,603. On December 27, 1989, Henri Kahn issued a personal check in the amount of Php50,000 as partial payment
for the outstanding balance of the Federation. Thereafter, no further payments were made despite repeated demands.
Hence, this petition.
Issues: a. Whether or not private respondent can be made personally liable for the liabilities of the Philippines Football
Federation.
b. Whether or not the Court of Appeals is correct.
Held:
A. Yes. A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify a
contract. The contract entered into by its officers or agents on behalf of such association is binding or, as enforceable
against it. The officers or agents are themselves personally liable.
In attempting to prove the juridical existence of the Federation, Henri Kahn attached to his motion for
reconsideration before the trial court a copy of the constitution and by-laws of the Philippine Football Federation.
Unfortunately, the same does not prove that said Federation has indeed been recognized and accredited by either the
Philippine Amateur Athletic Federation or the Department of Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports association within the purview of the aforementioned laws and does
not have corporate existence of its own.
Thus being said, it follows that private respondent Henri Kahn should be liable for the unpaid obligations of the
unincorporated Philippine Football Federation. It is a settled principle in corporation law that any person acting or
purporting to act on behalf of the corporation which has no valid existence assumed such privileges and becomes
personally liable for contract entered into or for other acts performed as such agent.
B. No. PFF, upon its creation, is not automatically considered a national sports association. It must first be recognized and
accredited by the Philippine Amateur Athletic Federation and the Department of Youth and Sports Development. This fact
was never substantiated by Kahn. As such, PFF is considered as an unincorporated sports association. And under the
law, any person acting or purporting to act on behalf of a corporation which has no valid existence assumes such
privileges and becomes personally liable for contract entered into or for other acts performed as such agent. Kahn is
therefore personally liable for the contract entered into by PFF with IETTI.
There is also no merit on the finding of the CA that IETTI is in estoppel. The application of the doctrine of
corporation by estoppel applies to a third party only when he tries to escape liability on a contract from which he has
benefited on the irrelevant ground of defective incorporation. In the case at bar, IETTI is not trying to escape liability from
the contract but rather is the one claiming from the contract.

Pioneer Insurance & Surety Corporation vs Court of Appeals

FACTS: Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced Constancio
Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy Equipment Company
(BORMAHECO) to contribute funds and to buy two aircrafts which would form part a corporation which will be the
expansion of Southern Air Lines. Maglana et al then contributed and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of Maglana et
al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which were brought in installment
from Japan Domestic Airlines (JDA) using said aircrafts as security. So when Lim defaulted from paying JDA, the two
aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.

HELD: No. There was no de facto partnership. Ordinarily, when co-investors agreed to do business through a corporation
but failed to incorporate, a de facto partnership would have been formed, and as such, all must share in the losses and/or
gains of the venture in proportion to their contribution. But in this case, it was shown that Lim did not have the intent to
form a corporation with Maglana et al. This can be inferred from acts of unilaterally taking out a surety from Pioneer
Insurance and not using the funds he got from Maglana et al. The record shows that Lim was acting on his own and not in
behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.
G.R. No. L-19891
July 31, 1964
J.R.S. BUSINESS CORPORATION, vs. IMPERIAL INSURANCE, INC.
PAREDES, J.:
FACTS: Imperial Insurance, Inc., filed with the CFI Manila a complaint for sum of money against JRS. Subsequently, the
parties entered into a Compromise Agreement where JRS promised to pay their obligation and should they fail to pay,
Imperial Insurance shall be entitled to move for the execution of the decision.
When JRS failed to pay, Imperial Insurance Inc., filed a "Motion for the Insurance of a Writ of Execution". A Writ of
Execution was issued by the Sheriff of Manila and Notices of Sale were sent out for the auction of the personal properties
of the J.R.S. A Notice of Sale of the "whole capital stocks of the JRS Business Corporation, the business name, right of
operation, the whole assets, furnitures and equipments, the total liabilities, and Net Worth, books of accounts, etc., etc." of
the petitioner corporation was, handed down.
JRS presented an "Urgent Petition for Postponement of Auction Sale and for Release of Levy on the Business
Name and Right to Operate of JRS Business Corporation", stating that they were busy negotiating for a loan with which to
pay the judgment debt; that the judgment was for money only and, therefore, the Insurance Company was not authorized
to take over and appropriate for its own use, the business name of the defendants; that the right to operate under the
franchise, was not transferable and could not be considered a personal or immovable, property, subject to levy and sale.
RTC denied the motion for postponement of the auction sale.
In the auction sale, all the properties of JRS contained in the Notices of Sale, were bought by Imperial Insurance,
Inc., for P10,000.00, which was the highest bid offered. Immediately after the sale, the Insurance Company took
possession of the properties and started running the affairs and operating the business of the JRS. Hence, the present
appeal.
ISSUE: WON the business name or trade name, franchise (right to operate) and capital stocks of the petitioner are
properties or property rights which could be the subject of levy, execution and sale.
HELD: NEGATIVE. The corporation law, on forced sale of franchises, provides that any franchise granted to a corporation
to collect tolls or to occupy, enjoy, or use public property or any portion of the public domain or any right of way over public
property or the public domain, and any rights and privileges acquired under such franchise may be levied upon and sold
under execution, together with the property necessary for the enjoyment, the exercise of the powers, and the receipt of
the proceeds of such franchise or right of way, in the same manner and with like effect as any other property to satisfy any
judgment against the corporation: Provided, That the sale of the franchise or right of way and the property necessary for
the enjoyment, the exercise of the powers, and the receipt of the proceeds of said franchise or right of way is especially
decreed and ordered in the judgment: And provided, further, That the sale shall not become effective until confirmed by
the court after due notice. (Sec. 56, Corporation Law.)
In the case of Gulf Refining Co. v. Cleveland Trust Co., it was held that a"A franchise is a special privilege
conferred by governmental authority, and which does not belong to citizens of the country generally as a matter of
common right. It may have different significations. "For practical purposes, franchises, so far as relating to corporations,
are divisible into (1) corporate or general franchises; and (2) special or secondary franchises. The former is the franchise
to exist as a corporation, while the latter are certain rights and privileges conferred upon existing corporations, such as the
right to use the streets of a municipality to lay pipes or tracks, erect poles or string wires. The primary franchise of a
corporation that is, the right to exist as such, is vested "in the individuals who compose the corporation and not in the
corporation itself"
The right to operate a messenger and express delivery service, by virtue of a legislative enactment, is admittedly
a secondary franchise and, as such, under our corporation law, is subject to levy and sale on execution together and
including all the property necessary for the enjoyment thereof. The law, however, indicates the procedure under which the
same (secondary franchise and the properties necessary for its enjoyment) may be sold under execution. Said
SECONDARY franchise can be sold under execution, when such sale is especially decreed and ordered in the judgment
and it becomes effective only when the sale is confirmed by the Court after due notice (Sec. 56, Corp. Law). The
compromise agreement and the judgment based thereon, do not contain any special decree or order making the franchise
answerable for the judgment debt. The same thing may be stated with respect to petitioner's trade name or business
name and its capital stock. Incidentally, the trade name or business name corresponds to the initials of the President of
the petitioner corporation and there can be no serious dispute regarding the fact that a trade name or business name and
capital stock are necessarily included in the enjoyment of the franchise. Like that of a franchise, the law mandates, that
property necessary for the enjoyment of said franchise, can only be sold to satisfy a judgment debt if the decision
especially so provides. Moreover, a trade name or business name cannot be sold separately from the franchise, and the

capital stock of the petitioner corporation or any other corporation, for the matter, represents the interest and is the
property of stockholders in the corporation, who can only be deprived thereof in the manner provided by law.

Secosa vs. Heirs of Francisco, [G.R. No. 160039. June 29, 2004]
Facts: Francisco, an 18 year old 3rd year physical therapy student was riding a motorcycle. A sand and gravel truck was
traveling behind the motorcycle, which in turn was being tailed by the Isuzu truck driven by Secosa. The Isuzu cargo truck
was owned by Dassad Warehousing and Port Services, Inc.. The three vehicles were traversing the southbound lane at a
fairly high speed. When Secosa overtook the sand and gravel truck, he bumped the motorcycle causing Francisco to fall.
The rear wheels of the Isuzu truck then ran over Francisco, which resulted in his instantaneous death. Secosa left his
truck and fled the scene of the collision.
The parents of Francisco, respondents herein, filed an action for damages against Secosa, Dassad Warehousing
and Port Services, Inc. and Dassads president, El Buenasucenso Sy.
The court a quo rendered a decision in favor of herein respondents; thus petitioners appealed the decision to the
Court of Appeals, which unfortunately affirmed the appealed decision in toto. Hence, the present petition.
ISSUE: Whether or not Dassads president, El Buenasucenso Sy, can be held solidary liable with co-petitioners.
HELD: No. Sy cannot be held solidarily liable with his co-petitioners. While it may be true that Sy is the president of
Dassad Warehousing and Port Services, Inc., such fact is not by itself sufficient to hold him solidarily liable for the
liabilities adjudged against his co-petitioners.
A corporation has a personality separate from that of its stockholders or members. The doctrine of veil of
corporation treats as separate and distinct the affairs of a corporation and its officers and stockholders. As a rule, a
corporation will be looked upon as a legal entity, unless and until sufficient reason to the contrary appears. When the
notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard
the corporation as an association of persons. Also, the corporate entity may be disregarded in the interest of justice in
such cases as fraud that may work inequities among members of the corporation internally, involving no rights of the
public or third persons. In both instances, there must have been fraud and proof of it.
The records of the case does not point toward the presence of any grounds enumerated above that will justify the
piercing of the veil of corporate entity such as to hold Sy, the president of Dassad Warehousing and Port Services, Inc.,
solidarily liable with it.
Furthermore, the Isuzu cargo truck which ran over Francisco was registered in the name of Dassad and not in the
name of Sy. Secosa is an employee of Dassad and not of Sy. These facts showed Sys exclusion from liability for
damages arising from the death of Francisco.

CRYSTAL VS BPI

Concept Builders Inc. vs. NLRC (May 29, 1996)

FACTS:
1. Private Respondents were the employees of the Petitioner Corporation. They filed illegal dismissal, unfair labor practice
and claimed for their benefits with the NLRC. They alleged that their contract of employment had not yet expired and the
project in which they were hired were not yet completed, as stated in the written notices sent by the Company.
2. NLRC, ruled in favor of the Employees. At the time of the termination of private respondents employment, the project in
which they were hired had not yet been finished and completed. Petitioner had to engage the services of sub-contractors
whose workers performed the functions of private respondents.
3. An alias Writ of Execution was issued by the Labor Arbiter to collect the balance of the judgment award and to reinstate
private respondents. However, the sheriff failed to enforce because the security guard on the premises refused him to
enter on the ground that, it is no longer occupied by the petitioner.
4. A certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be
levied upon by the sheriff were owned by Hydro (Phils.), Inc. (HPPI) of which he is the Vice-President. He alleged that
HPPI is a manufacturing firm while petitioner was then engaged in construction.

5. Private respondents filed a Motion for Issuance of a Break-Open Order, alleging that HPPI and petitioner corporation
were owned by the same incorporator and stockholders. NLRC granted the Motion.
ISSUES:
1. WON the Sister Company (HPPI) has a personality separate and distinct from the petitioner corporation (CONCEPT
BUILDERS)?
2. WON HPPI is used as a shield to evade the corporations subsidiary liability for damages?
HELD:
1. The Sister Company has NO separate and distinct personality from the Concept Builders
2. HPPI is used to Evade Corporations liability.
RATIONALE:
1. It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders
and from other corporations to which it may be connected. But, this separate and distinct personality of a corporation is
merely a fiction created by law for convenience and to promote justice. So, when the notion of separate juridical
personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to
defeat the labor laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of another
corporation
2. The conditions under which the juridical entity may be disregarded vary according to the peculiar facts and
circumstances of each case. No hard and fast rule can be accurately laid down, but certainly, there are some probative
factors of identity that will justify the application of the doctrine of piercing the corporate veil, to wit:
1. Stock ownership by one or common ownership of both corporations.
2. Identity of directors and officers.
3. The manner of keeping corporate books and records.
4. Methods of conducting the business.
The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:
Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy
and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the
time no separate mind, will or existence of its own;
Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal rights; and
The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents piercing the corporate veil. in applying the instrumentality or alter
ego doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual
defendants relationship to that operation.
NLRC stated that:
Both information sheets were filed by the same Virgilio O. Casino as the corporate secretary of both corporations. It
would also not be amiss to note that both corporations had the same president, the same board of directors, the same
corporate officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the respondent (herein petitioner) and the third-party
claimant shared the same address and/or premises. Under this circumstances, (sic) it cannot be said that the property
levied upon by the sheriff were not of respondents.
Clearly, petitioner ceased its business operations in order to evade the payment to private respondents of
backwages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner
corporation and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner
corporation.
It is very obvious that the second corporation seeks the protective shield of a corporate fiction whose veil in the
present case could, and should, be pierced as it was deliberately and maliciously designed to evade its financial obligation
to its employees.